Lucas to shed a further 2,750 jobs

LUCAS INDUSTRIES, the automotive and aerospace group, is to make 2,750 employees redundant worldwide as part of an pounds 88.4m restructuring programme involving the closure of 16 factory sites. It is also embarking on a series of disposals that will raise pounds 100m in the current financial year.

Sir Anthony Gill, chairman and chief executive, said yesterday that the aim of the restructuring was to cut costs and improve effectiveness in its core interests by modernising facilities and re-distributing activities across Lucas's international locations.

News of the shake-up accompanied results from Lucas for the year to 31 July showing halved operating profits of pounds 58.3m, a slump in pre-tax profits from pounds 82.8m to pounds 22.5m and an after-tax loss of pounds 8.8m.

This was after the pounds 88.4m restructuring provision, almost exactly offset by a pounds 90m credit from the company's pension fund surplus disclosed earlier this year.

Aerospace profits plunged from pounds 65.3m to pounds 19.1m because of defence cuts, civil order cancellations and a pounds 12m provision against warranties and stocks. Automotive profits stabilised at pounds 38.6m.

Despite the after-tax loss Lucas maintained its final dividend at 4.9p for an unchanged total of 7p.

Sir Anthony said the company intended to make enough profits to cover a maintained payment in the current year. Some saw this as a response to recent bid speculation but it brought a favourable response from the stock market, sending Lucas shares 4p higher to 94p.

But he warned that there was no sign of any general improvement in trading conditions and said that some markets - the UK, Germany and Italy - seemed to be deteriorating further. First-half results to January would only show a break-even position.

The Lucas job losses coincided with a strong attack on government policies by the Engineering Employers' Federation along with warnings of another 55,000 engineering job cuts next year.

'The decline in the economy seems to have been accompanied by ministerial paralysis,' said Neil Johnson, the federation's director general.

'The UK needs an industrial strategy, but after six months in office the Government which might have been expected to provide one has failed to do so.' The federation intends to present its own industrial strategy to the Government in six weeks' time.

Hit by the recession in its main automotive and aerospace markets, Lucas has decided to concentrate on its core businesses of braking systems, diesel fuel injection systems, aerospace engine control systems, flight actuators and automated controls.

The restructuring of these businesses will remove 4,000 jobs in total, of which 1,250 have already been lost in eight factory closures. The identity of a further eight site closures, where the remaining 2,750 jobs are to go, will be disclosed over the next few weeks.

More than half the 2,750 new job losses, out of Lucas's 50,000 workforce, will be overseas. Around 250 management jobs, some relatively senior, will go, cutting central overheads by 25 per cent.

On top of the new cuts from restructuring, Lucas expects to shed a further 1,500 jobs by next July as part of a continuing programme of cost reductions.

A new group executive, with direct access to Lucas's core businesses and central financial control, has replaced the sector and division executive groups. Tony Edwards, elevated from head of aerospace to group managing director in February, has been put back in charge of Lucas's aerospace activities as one of the eight-strong group executive.

Lucas intends to raise pounds 100m for disposals this year. The first four companies to be sold are its fluid power distribution business, based in North America, Autocentres in the UK, Defence Fabrications, which makes missile casings, and Aircraft Transparencies, which makes aircraft windows.

The four companies have sales of pounds 150m and employ 2,000. Bob Dale, formerly managing director automotive, is in charge of the divestment effort. He is also responsible for electrical systems, mainly traditional Lucas products such as starters and alternators now made in Latin America and India, which have sales of pounds 350m and are also likely to be sold.

Lucas intends to keep its electrical wiring harness activities although they do not fit its core definition. They are seen as having particular value because of their use by Toyota and Honda in 'transplant' factories.

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